You are not taking the whole market into consideration. Maybe they are good at writing the game engine and then hosting, but others may be better at just hosting. So, they could be outcompeted by people who don't want to pay the cost/risk of building an engine. Others may be better at hosting godot than they ever will, although those people would not be there if there was no godot or if godot was not free. Free software (copyleft licenses in special) can be a threat for commercial software in two ways: a. users may just jump to the free alternative and leave yours b. it levels the field so new competitors can come in without paying the initial investment you made.
Just to be clear, I'm not saying that they are incorrect in assessing that godot is not a threat. They seem to consider they have other features beyond godot's scope which is what differentiate them in the market. What I am saying is that free software can certainly be a threat to a business. In fact, it can be even a larger threat than a single competitor, because it can turn your product into a commodity.
I still don't see what you mean. It sounds like you are saying the real threat would be if they had no other features that could let them stand out in the market, at which point a competitor would be able to beat them by lowering the price, possibly to zero. That can be done by any competitor and has very to do with the license -- my point is that the open source license on that "competing product" actually helps them, by allowing them to make use of the same thing without having to pay that initial investment again. And the first initial investment you made isn't lost as long as you keep a path to retaining those customers.
To put it another way, if the actual problem to the business is that they are falling behind on feature velocity and don't have the head count to keep up, re-using some features from open source code could actually help there.
Yes -- so if the company falls behind, maybe using some open source code could help you keep up. At least that's what I've felt looking at things on github/gitlab/etc has helped with, if done the right way :)
Let me try to draw a picture. Say you have a web based game engine. It is the only game engine as a service in the market which also runs in a browser. Then, a popular open source game engine becomes web based too. Before, you had no competitors, now you have to compete against a product that's free.
You may lose some costumers that only cared about it being web based and who are willing to learn another engine. Not only that, a single guy decides to host the game engine in the cloud and charge really cheap for it. Now, if you want to compete in price, you probably have to fire all your game engine devs and significantly downsize. Either that or have vastly superiour features to justify your higher price in the eyes of the costumers. All that threats your company's existence.
I'm not saying it's impossible to compete, but the more overlap between your product and a free software product, the bigger the threat will be.
Just to be clear, I'm not saying that they are incorrect in assessing that godot is not a threat. They seem to consider they have other features beyond godot's scope which is what differentiate them in the market. What I am saying is that free software can certainly be a threat to a business. In fact, it can be even a larger threat than a single competitor, because it can turn your product into a commodity.